Thursday, March 29,
2018 /06:10 PM / FBNQuest
ResearchEvent: PZ Cussons Nigeria reports Q3 2018 (end-Nov) resultsImplications: Negative reaction expected
by the marketPositives: Q3 PBT
and PAT up 5% q/q and 6% q/q to N1.1bn to N668m respectivelyNegatives: Sales
declined -7% y/y to N22.1bn while PAT fell -64% y/yToday, PZ Cussons Nigeria (PZ) reported Q3
2018 (end-Feb) results. While sales of N22.1bn fell by -7% y/y, the
decline in PBT and PAT was more significant. PBT and PAT declined by -61% y/y
and -64% y/y respectively. Positives coming through from relatively lower net
finance charges and forex-related losses were completely offset by the topline
decline and a -583bps y/y contraction in gross margin to 26.7%. PZ Cussons
UK (the parent company) issued a profit warning for its Q3 2018 (end-Feb)
results.According to the statement, continued weak
consumer discretionary spending in Nigeria took a toll on unit volumes in Q3.
Therefore the expectation was that Q3 results for its Nigerian operations would
be materially lower than expected. PZ shares gained +2% today to close at
N23.45. Given the statement by its parent it is possible the market might have
anticipated a far worse Q3 results. Sequentially, while sales came in flattish
q/q, PBT and PAT were both up by around 5% q/q.Compared with our estimates, sales and PBT both missed by -23% and -64%
respectively. The major drivers of the variance were a weaker-than-expected
topline growth and a negative surprise on the fx-related loss line. On an annualised basis, 9M
2018 PBT is tracking well behind consensus FY 2018 estimate of
N6.9bn. Hence, we expect downward revisions to these estimates. PZ shares have
gained 10.9% ytd (vs 8.5% ytd for the ASI).We rate the stock
Underperform. Our estimates are under review.PZ Cussons Nigeria Q3 2018
results vs. FBNQuest Capital Research estimates (N millions)Source: NSE, FBNQuest Capital Research estimates